CBS welcomes March e-madness

Commentary: Heady play ... even if the site chokes

By

BambiFrancisco

SAN FRANCISCO (MarketWatch) -- When the NCAA men's basketball tournament gets into full swing Thursday, hundreds of thousands of viewers are expected to access the action on the Web -- live and free of charge, thanks to CBS.

For those hiding under a rock, CBS
CBS, -1.60%
is airing tournament games online without a subscription wall and without delays. (You can register and watch the games in real time at cbs.sportsline.com, cstv.com and ncaasports.com.)

It's a move that's as aggressive as it is clever. Yet, in many ways, it's no more high-risk than an uncontested layup.

While online video quality is far from perfect, advertisers are eager to chase this audience, and CBS is taking its best shot at scoring a huge Web win by offering up one of its hottest assets -- it's held the rights to telecast the tourney since 1982 -- with virtual certainty it'll attract huge numbers of eyeballs.

What does CBS risk? Not much. Besides the expense of supporting an all-but-unprecedented broadband audience, it'll go nose to nose with a potential crash that could drive angry fans, or curious observers, away -- or to their wide-screen TV sets. See Media Report.

For viewers not tethered to their cubicles, no great hardship there. And little lingering damage for CBS Corp.

'We definitely anticipate the largest [online audience for a live event] in history.'
Larry Kramer, CBS

For such online advertisers as Dell and Marriott, though, there'd be plenty of reason to be miffed. They've paid up for 30-second commercials on the Web. If the technology chokes up, they'd get ad time elsewhere, at some point, across CBS's digital properties.

When the rewards outweigh the risks, as they do for CBS here, boldness is of greater value than preparedness.

There is no shortage of either attribute at CBS.

S.R.O.

Larry Kramer, head of CBS's digital operations, said he's prepared for 200,000 simultaneous viewers, placing the tournament Webcasts squarely among the top live online draws of all time. The biggest previous events include Yahoo's coverage of Howard Stern's final day in terrestrial radio, which, according to Yahoo, pulled 214,000 simultaneous viewers, and the Live 8 concert shown on Time Warner's
TWX, +0.72%
AOL.com site, during which 175,000 simultaneous viewers were said to have logged on. Also near the top of the list: Victoria's Secret's notorious fashion shows.

Kramer said he's stockpiled extra bandwidth to support a boffo virtual audience. "We definitely anticipate the largest in history," he said.

"What happens if it hits 500,000?" I asked.

"Who knows?" Kramer answered. "We'll close the door."

One backstop in place is a virtual waiting room, where the overflow audience will cool its heels, claiming viewer slots only as other people clear out. Admitted Kramer: "No one knows how this will scale."

Why now, and why free?

Anyone who knows Larry Kramer knows he's a longtime proponent of "free." Kramer founded MarketWatch (and hired me) and kept the site ad-supported, parting with rival news sites that went the subscription route. Kramer jumped to CBS Corp. after MarketWatch, the publisher of this column, was acquired by Dow Jones
DJ
last year.

Though one might be tempted to link CBS's open-door approach to Kramer's inclination toward free content supported by ads, a number of factors led to his decision.

One of his lieutenants first proposed the free-and-live idea last summer, Kramer reported, saying he thought it was a great idea from the moment he heard it -- as long as advertisers would support it.

Obviously, along the way, he became convinced they would.

"The ability to do broadband to a large audience has increased rapidly," he said. "The advertising community has embraced video on the Web. They weren't ready a year or two ago."

Indeed, online-advertising spending is estimated to have grown by 30% to exceed $12.5 billion in 2005, according to data from the Internet Advertising Bureau and PricewaterhouseCoopers. By comparison, revenue generated by paid content on the Web reached $2 billion in 2005, according to the Online Publishers Association.

Plus, today, the number of people with audio- and video-friendlier broadband access at work or at home has risen to 71% of the overall online population, regardless of urban or rural locale, according to the latest Pew Internet research report.

Last year, CBS made NCAA tournament games available via CSTV.com for a $19.95 subscription fee. About 25,000 people signed up. That half a million dollars' worth of subscription fees went to CSTV Networks Inc. -- since acquired by CBS -- but it wasn't enough to cover the flat fee paid to CBS for the rights.

In 2003, CBS had sold tournament Webcast rights to Yahoo
YHOO, +0.85%
in a bundle with other online content, including MarketWatch video reports, from CBS and parent Viacom
VIA, -0.35%
to help create Yahoo Platinum, a fee-based video offering.

This March, according to Kramer, the value of advertising sponsorships has already exceeded subscription sales from last year. "We're making money. ... By and large, we covered our costs," he said.

A different ballgame

CBS is bypassing Yahoo-style portals altogether in 2006, raising the question of what these Internet aggregators are worth, now that the traditional media companies are going directly to consumers?

Kramer and company have lined up 19 advertising sponsors, he said.

'I don't think anyone able to watch this on television will go online. What this will do is draw more viewers.'
Larry Kramer

Those advertisers' commercials will air only on the Web, while advertisers that have paid to be on television will have their commercials aired there.

You could sit in front of a computer and a television and watch two different commercials running at precisely the same moment -- except that CBS, to appease advertisers whose commercials air only locally, plans to avoid showing the same game both online and on TV in a given city or region.

Though TV ads, particularly in the early stages of the NCAA tournament, come nowhere near Super Bowl-level pricing, CBS's Web commercial packages cost far less and might be expected to include such traditional online elements as banners and pop-ups.

Courting new viewers

Last year, the tournament drew 141.7 million total TV viewers, according to CBS. And Kramer said he doesn't expect this season's online alternative to steal away TV viewers. He predicted the Web audience instead will be additive. "If you can watch this on TV, you're going to," he conceded. "So, I don't think anyone able to watch this on television will go online. What this will do is draw more viewers."

Exactly. Like those of us who'll be at work.

Noting that NCAA tournament pools are highly popular in many offices, Kramer voiced his backing for the occasional sports fix with which some otherwise vigilant employees break up the day. "People will tend to go in and out" of game Webcasts while they work, he said. "If it's free, they'll take a shot."

Another audience being tapped: fans who find themselves geographically, if not emotionally, distant from their alma maters.

Kramer, a rabid Syracuse University fan, lives and works in the San Francisco area. When his beloved Orange takes the floor in Jacksonville, Fla., the game won't be aired by the Bay Area's CBS affiliate. But it will be on the Web.

And so will Kramer.

Cutting down the nets

"How will you measure the success of this event?" I asked. "And, if this goes well, what other types of programming can we expect?"

"We'll see what kind of response we get," Kramer answered. He hasn't discounted the fee-based model, either.

As part of the offering, CBS will offer 15- to 20-minute condensed and delayed versions of tournament games via the Apple
AAPL, +1.63%
iTunes store for $1.99 apiece. Even though Google
GOOG, +1.66%
has a deal to rent CBS video, the search giant wasn't selected to distribute the tournament package.

The NCAA tournament -- with 65 college teams, reduced to 64 by Tuesday's play-in game, from all across the country -- is "a perfect event for the Web," said Kramer.

Indeed, the event underscores the Web's two-way nature. This is not a one-size-fits-all medium. While that might create some surprises, particularly in the area of usage capacity, it also gives each viewer something personal and each advertiser, at least theoretically, an audience that's better-targeted.

By the end of the tournament -- the national-championship game is to be played April 3 -- we'll know whether carry games live online has helped CBS break new ground, reaching new audiences and racking up big ad bucks.

Or we'll know that CBS tried and crashed.

"Our fear centers on the unknown," said Kramer. "It'll be an important moment for us."

Sound-off: I'm taking a pulse of the game and whether CBS is delivering on its promise. If you want to share your experience about the first free and live NCAA tournament, go to Bambi.blogs.com.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.